In line with the principles set out in Q&A 4731, institutions should not communicate their profit distribution policies in terms of absolute amounts of share buyback; they should only communicate the amount as a maximum percentage of profit.

Institutions that adopt profit distribution policies which include share buybacks, used as a tool for ordinary distribution of profits, must treat these share buybacks in the same way as cash dividend and deduct them as foreseeable charge or dividend for the purposes of the inclusion of interim/year-end profits in CET1 capital pursuant to Article 26(2) CRR. Since these share buybacks cannot take place until the institution has received prior permission under Article 77(1) and 78 CRR, until that moment the total of cash dividends and share buybacks included in the distribution policy can be expected to be distributed as cash dividend and shall be deducted as foreseeable charge or dividend. If share buybacks that aim at remunerating shareholders for the relevant financial year were not deducted in the same way as cash dividend as foreseeable charge or dividend as of the moment of the interim/year-end profits inclusion, the reported CET1 capital would not be fully available to the institution for unrestricted and immediate use to cover risks or losses as soon as these occur given that part of this CET1 is expected to be distributed.

This is without prejudice to the requirement to apply for a prior permission under Article 77(1) and 78 CRR to reduced capital instruments and related share premium accounts.